World reports

Stocks to watch

AAP

2012-12-17

The Australian dollar is slightly lower against its US counterpart, despite increased expectations of economic stimulus in Japan.

At 1700 AEDT on Monday, the currency was trading at 105.35, down slightly from 105.44 cents on Friday afternoon.

Easy Forex currency dealer Tony Darvall said the Australian dollar moved higher on Monday following a positive reaction to the Liberal Democratic Party's victory in Japanese elections over the weekend.

The result has increased expectations of further economic stimulus in Japan and pushed the Australian dollar to its highest level against the Japanese yen since May 2011.

LDP leader, Shinzo Abe, has said Japan's central bank should be willing to use unlimited measures of economic stimulus to control inflation in the country.

"The chances are they are going to have a very loose monetary policy going forward so the market has capped higher," Mr Darvall said.

But Mr Darvall said the Australian dollar lost ground against the US dollar later on Monday as investors took profits from the rally.

But he said the currency was likely to move higher overnight on Monday, especially if the euro, which has rallied sharply, continued to move higher.

"It is probably going to be well supported if the euro continues to go higher," Mr Darvall said.

At 1700 AEDT, the Australian dollar was at 88.55 Japanese yen, up from 88.47 yen on Friday, and at 80.06 euro cents, down from 80.52 euro cents.

Meanwhile, Australian bond futures prices are higher after investors took advantage of a recent sell off in local fixed-income assets.